Search

Algo gives an update on private placement and announces delay in filing its financial statements

MONTREAL, March 15 /CNW Telbec/ - Algo Group Inc.(TSX : AO) previously
announced that it had entered into an agreement with its primary lenders,
whereby such primary lenders agreed to subscribe for securities of Algo in
reduction and cancellation of approximately $9.5 million of debt owed to them
under Algo's existing credit facilities. As a condition to the reduction and
cancellation of such debt, the agreement also provided that Algo was required
to complete a private placement of securities for total proceeds of
$3 million, such proceeds to be used to repay outstanding amounts under Algo's
revolving loan. The completion of these transactions is subject to certain
conditions, including the receipt by Algo of all necessary regulatory
approvals, including the approval of the Toronto Stock Exchange.
Algo has raised the $3 million and is working towards the completion of
these transactions. However, due to Algo's financial situation and the delays
incurred in completing these transactions, it was not in a position early in
the year to have its auditors commence the audit fieldwork required in order
to complete its annual audit. Following the receipt of the full $3 million,
Algo dedicated its resources and focus on operational issues important to the
continuity of its business although this caused a further delay in the
commencement of its audit. As a result, the audit of Algo's consolidated
financial statements will not be completed by March 31, 2007, and, as such,
Algo will not be in a position to file its audited consolidated financial
statements, related audit report and MD&amp;A by the March 31, 2007 filing
deadline applicable to reporting issuers in Canada.
In accordance with applicable securities legislation, Algo has notified
the Canadian securities authorities of the late filing of its annual financial
information. Due to the late filing, Algo's securities may become subject to a
cease trade order to be issued by the Autorité des marchés financiers
(Québec). Algo has requested that such cease trade order be limited to certain
members of its management and to insiders of Algo. However, in its discretion,
the Autorité des marchés financiers may determine that it would be appropriate
to issue a cease trade order affecting all of Algo's securities. Additionally,
if Algo fails to file its financial statements by May 31, 2007, any cease
trade order limited to management and to insiders of Algo can be expected to
be extended to all of Algo's securities. Algo currently expects that RSM
Richter will complete its audit in time for Algo to file the required
financial information prior to May 31, 2007. Algo will announce any changes in
this timeline as the audit progresses.
Algo will request an order from the Autorité des marchés financiers that
would allow Algo to continue to proceed towards the completion of its
announced private placement transactions despite the issuance of the cease
trade order that may be issued affecting Algo's securities. Algo will provide
an update on this matter once a decision has been rendered by the Autorité des
marchés financiers. The completion of these transactions will be further
delayed if the Autorité des marchés financiers decides in its discretion not
to grant Algo the requested order.
In order to complete the private placement, Algo intends to avail itself
of the financial hardship exemption provisions under Section 604(e) of the TSX
Company Manual and of similar provisions contained in applicable provincial
securities legislation. Algo will therefore be exempted from the requirement
to obtain shareholder approval and to complete a formal valuation in
connection with the private placement. In order to complete the private
placement, the board of directors of Algo, including the sole director of Algo
who is free from any interest in the private placement and who is unrelated to
the parties who will receive shares further to the private placement, will be
required to approve same.
A corporation controlled by Mr. Marc Kakon, President and CEO of Algo,
provided $250,000 of the $3 million that Algo was required to raise, a
corporation controlled by Mr. Dan Elituv, Chairman of Algo, provided $700,000,
and a corporation controlled by Max Azria, a former director of Algo, provided
$500,000. As such, these corporations will each receive junior secured
promissory notes convertible at their option into, respectively, 1,666,667,
4,666,667 and 3,333,333 common shares. Given the foregoing, Mr. Kakon and
Mr. Elituv will abstain from voting on the final approval of the private
placement.
ALGO GROUP PROFILE
------------------
Algo Group is a leading Canadian manufacturer and importer of ladies'
fashion apparel, as well as men's, boy's and children's sportswear that is
marketed throughout North America. The Company also imports home furnishing
products that it markets to retailers in North America, and holds licenses to
sell various brand products such as Rodier, Ted Lapidus, Votre Nom and Levi's
Home in Canada and the United States.
Forward-looking statement
Except for historical information provided herein, this press release may
contain information and statements of a forward-looking nature concerning the
future performance of the Company. These statements are based on suppositions
and uncertainties as well as on management's best possible evaluation of
future events. Such factors may include, without excluding other
considerations, fluctuations in quarterly results, evolution in customer
demand for the Company's products and services, the impact of price pressures
exerted by competitors, and general market trends or economic changes. As a
result, readers are advised that actual results may differ from expected
results.